Glamping and VAT

Over recent years glamping has developed into a well-established element of the UK tourist industry as holidaymakers continue to seek out the more luxurious forms of camping. For many, glamping provides the ‘back to nature’ experience but with hotel like features.

For rural landowners and farmers looking to diversify their operations, glamping is becoming more and more attractive as an alternative income source. It is not without complication though, with VAT in particular being one of the taxes that the landowner or farmer needs to be mindful of.

Glamping sector and VAT

There are VAT complexities associated with starting up a glamping business and the provision of glamping services is subject to the standard rate of VAT. UK based suppliers, if not already registered for VAT, would have to register once the value of their taxable turnover exceeds the VAT registration threshold (currently £85,000, increasing to £90,000 from 1 April 2024) over a rolling 12-month period. Whilst some would prefer to wait until the obligation to register for VAT arises, others prefer to register voluntarily and in particular when first setting up the business, to ensure VAT paid on costs, including the glamping tents or pods themselves can be reclaimed.

Nick Hart, VAT Director and a member of the firm’s Land and Rural Practice Group comments:

“Maximising VAT recovery is important as the initial outlay on equipment and set up costs can be significant. Whilst there are opportunities to reclaim VAT on costs incurred pre-VAT registration, many prefer to register and reclaim VAT at the start, as recoverable VAT can assist with cash flow when setting up the glamping business. For those operating the glamping business through an entity or person which is already VAT registered, they would simply need to charge VAT from the first booking and reclaim VAT on the associated purchases.”

Structuring the glamping business

It is not uncommon for a new glamping business to be operated through a separate vehicle, rather than by the landowner or farmers themselves. The drivers to this include the protection of assets and risk management around having members of the public on their site. Ring-fencing the glamping business in a separate vehicle clearly has its advantages however the VAT position needs to be thought through carefully.

Nick commented:

“For a separate vehicle to operate the glamping business, it will need to be granted rights to do this by the landowner. The landowner may elect to, or indeed have to, charge VAT when granting those rights, to ensure its own VAT recovery position is not impacted. This may influence the glamping business’s decision of when to register for VAT.”

Care must also be taken where the site is owned by one party, but the glamping business is to be operated through another vehicle, when it comes to the initial equipment purchases. Nick added:

“It’s important from a VAT recovery perspective that the glamping tents/pods are purchased by the operating company and not the landowner, otherwise complications will arise, with potentially lost VAT recovery opportunities. Taking advice during the business planning stage is recommended so that the appropriate operating structure can be agreed and then the VAT position can be addressed before significant costs start to be incurred.”

VAT reporting

The bookings made by customers are often taken and processed by agents, as they are with more traditional camping holidays and holiday cottages. For the glamping business the amount of income for which the VAT is to be accounted for is the gross income and not the amount net of agent fees.

Nick noted:

“The VAT complexities associated with glamping extend to the practicalities of VAT accounting, including the income value for which VAT needs to be paid, and the time when the VAT liability needs to be reported in the accounting records. Many businesses new to glamping/camping or the provision of holiday accommodation, can overlook such matters and advice is recommended.”

If you have any queries on the points raised, please get in touch with Nick Hart.